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Test your basic knowledge |
AP Microeconomics
Start Test
Study First
Subjects
:
economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Exists if a producer can produce more of a good than all other producers
Non-collusive oligopoly
Absolute Advantage
Normal Goods
Implicit costs
2. The difference between total revenue and total explicit and implicit costs
Least-Cost Rule
Economic Profit
Total Fixed Costs (TFC)
Marginal Cost (MC)
3. Costs that change with the level of output. If output is zero - so are TVCs.
Private goods
Productive Efficiency
Substitution Effect
Total variable costs (TVC)
4. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand
Substitute Goods
Cross-Price Elasticity of Demand
Constant cost industry
Short run
5. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it
Monopoly
Free-Rider Problem
Substitution Effect
Productive Efficiency
6. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good
Perfectly elastic
Absolute Advantage
Spillover costs
Marginal Productivity Theory
7. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms
Demand for Labor
Four-firm concentration ratio
Economic Profit
Price Elasticity of Supply
8. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately
Total Fixed Costs (TFC)
Monopolistic competition
Complementary Goods
Perfectly elastic
9. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Total Fixed Costs (TFC)
Relative Prices
Determinants of elasticity
Long Run
10. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price
Market power
Perfectly competitive long-run equilibrium
Producer surplus
Positive externality
11. The sum of consumer surplus and producer surplus
Total Welfare
Producer surplus
Cross-Price Elasticity of Demand
Private goods
12. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus
Price floor
Marginal Analysis
Economies of Scale
Free-Rider Problem
13. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.
Break-even Point
Economics
Profit Maximizing Rule
Natural Monopoly
14. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good
Monopolistic competition long-run equilibrium
Substitution Effect
Positive externality
Resources
15. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry
Total Welfare
Oligopoly
Allocative Efficiency
Excess Capacity
16. The practice of selling essentially the same good to different groups of consumers at different prices
Luxury
Absolute prices
Price discrimination
Excise Tax
17. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC
Economic Growth
Surplus
Profit Maximizing Resource Employment
Price Ceiling
18. Two goods are consumer substitutes if they provide essentially the same utility to consumers
Substitute Goods
Economic Growth
Total variable costs (TVC)
Law of Demand
19. Ei > 1
Normal Profit
Luxury
Price floor
Substitution Effect
20. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF
Absolute Advantage
Allocative Efficiency
Substitution Effect
Least-Cost Rule
21. Entry (or exit) of firms does not shift the cost curves of firms in the industry
Constrained Utility Maximization
Constant cost industry
Productive Efficiency
Implicit costs
22. Exists if a producer can produce a good at lower opportunity cost than all other producers
Constant cost industry
Substitution Effect
Comparative Advantage
Total Revenue
23. A good for which higher income increases demand
Cross-Price Elasticity of Demand
Monopsonist
Normal Goods
Perfect competition
24. Models where firms agree to mutually improve their situation
Total Revenue
Normal Goods
Marginal Analysis
Collusive oligopoly
25. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability
Four-firm concentration ratio
Resources
Comparative Advantage
Marginal Productivity Theory
26. The imbalance between limited productive resources and unlimited human wants
Inferior Goods
Scarcity
Perfect competition
Dead Weight Loss
27. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur
Accounting Profit
Spillover benefits
Explicit costs
Collusive oligopoly
28. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit
Monopoly long-run equilibrium
Price Elasticity of Supply
Marginal tax rate
Scarcity
29. When firms focus their resources on production of goods for which they have comparative advantage
Specialization
Production function
Cross-Price Elasticity of Demand
Constant Returns to Scale
30. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Dead Weight Loss
Unit elastic demand
Profit Maximizing Resource Employment
Monopolistic competition long-run equilibrium
31. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income
Marginal tax rate
Total Revenue Test
Economies of Scale
Collusive oligopoly
32. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits
Monopolistic competition long-run equilibrium
Marginal Benefit (MB)
Cartel
Average Product of Labor (APL)
33. Exists at the point where the quantity supplied equals the quantity demanded
Substitution Effect
Surplus
Market Equilibrium
Average Total Cost (ATC)
34. Ed = 0 - no response to price change
Perfectly inelastic
Constant cost industry
Total variable costs (TVC)
Spillover benefits
35. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run
Allocative Efficiency
Shutdown Point
Natural Monopoly
Monopolistic competition
36. Ed = 8 - infinite change in demand to price change
Perfectly elastic
Decreasing Cost industry
Surplus
Fixed inputs
37. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Unit elastic demand
Price elastic demand
Long Run
Break-even Point
38. The additional benefit received from the consumption of the next unit of a good or service
Increasing Cost Industry
Marginal Benefit (MB)
Absolute Advantage
Monopsonist
39. The change in quantity demanded resulting from a change in the price of one good relative to other goods
Market Economy (Capitalism)
Necessity
Substitution Effect
Determinants of elasticity
40. AFC = TFC/Q
Collusive oligopoly
Average Fixed Cost (AFC)
Law of Supply
Price elastic demand
41. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Determinants of Demand
Marginal Productivity Theory
Substitute Goods
Perfectly inelastic
42. A firm that has market power in the factor market (a wage-setter)
Marginal Resource Cost (MRC)
Monopsonist
Public goods
Cartel
43. Entry of new firms shifts the cost curves for all firms downward
Total Fixed Costs (TFC)
Decreasing Cost industry
Scarcity
Natural Monopoly
44. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly
Determinants of Labor Demand
Constant Returns to Scale
Four-firm concentration ratio
Economic Profit
45. The output where ATC is minimized and economic profit is zero
Absolute prices
Break-even Point
Relative Prices
Substitution Effect
46. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment
Average Variable Cost (AVC)
Normal Goods
Excess Capacity
Least-Cost Rule
47. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good
Public goods
Economic Profit
Opportunity Cost
Total variable costs (TVC)
48. The lost net benefit to society caused by a movement away from the competitive market equilibrium
Dead Weight Loss
Market Economy (Capitalism)
Monopoly long-run equilibrium
Total Revenue Test
49. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price
Consumer surplus
Increasing Cost Industry
Private goods
Diseconomies of Scale
50. Occurs when LRAC is constant over a variety of plant sizes
Demand for Labor
Fixed inputs
Marginal Resource Cost (MRC)
Constant Returns to Scale